How To Get a Car Loan Without Credit History In Canada?
Driving a car is no longer a luxury, it is a necessity! Having said this, which car to buy, from where, how much to spend, what is the right price, where to get it financed and so on…these questions can be quite taxing mentally. With several car dealerships selling all popular car makes & models at competitive prices, makes it even more difficult to decide which is the right one.
Amongst all these factors that influence the car purchase decision, the most important is probably how much you are ready to pay for the car. Search and selection is usually done with a budget in mind. In order to restrict their selection to a certain spend, buyers often compromise on parameters like color, other different features & options that the car has to offer. However, key deciding factor remains the financial health of the buyer.
It is a proven belief that people with good credit score are usually successful in getting a car loan approval in Canada. Bad credit, New Credit or No credit can have a difficulty in convincing a financial institution/lender that the loan amount will be paid off timely. When a loan application is submitted, lenders do a detailed scrutiny of the financial health of applicant.
Historical payment pattern, present day capability to pay loans, future competence to timely pay off the loan amount is given due consideration before any approval is done. At that time the credit score makes plays a crucial role. Bad credit score can makes things difficult as financial institutions may not give a favourable decision if they are unsure of the pay back capability of the borrower.
Since Credit score is a key parameter used by lenders for giving auto loan approval, applicants with No Credit Score may find it tough to convince them for approving the loan amount. Though this is a difficult factor to handle, it not impossible. Knowing how the lending process works, if you are an applicant with no previous credit score, you need to take up certain steps that will act in your favour for loan approval.
Some of the alternatives worth evaluating are:
Engage a co-signer – In absence of your credit score/history, it is a good idea to get a family member or friend to act as a co-signer in your purchase. The pre-condition, of course, is that the person has a good financial health and credit background and can easily get a loan approval. In the loan application the name of the co-signer is included and the financial institution runs a background check for that person to assess whether a loan can be approved or not. This essentially means that the co-signer becomes liable for the re-payment of the lien. If at any point of time there is a default in the payment then the co-signer’s credit gets impacted. It is for this reason, no one easily agrees to be part of a purchase simply to lend their credit.
It is therefore suggested that an immediate family member or a very close friend is approached so as to get a confirmed acceptance for co-partnering in car purchase. Needless to say, you have to ensure that there is no default or delay in the loan payments.
Collate relevant documents – In order to get a positive loan approval while there is no credit history to support the application, it is a good idea to collate certain documents that indicate a good intention as well as capability to pay up loan instalments. Papers like job offer letter, current date job confirmation, pay stubs, paid phone bill, gas bill prove that you have both the competence as well as the intention to pay your auto loans as well.
It has been seen with many lenders that they do take into consideration these factors while deciding loan approval, especially when the loan amount is not very high. So if you are thinking of purchasing a car with a low price, like a used car, then it makes it easier for you to get approved.
- Get Started with New Credit – It is never too late to start building your credit. There are many credit unions and community banks whose card you can use to instantly building up your credit condition. Even with small amount of purchases and timely repayments, you can set up a healthy credit history.
These financial institutions are often flexible in their terms of loans for first timers. They often run programs for new buyers that offer loan at softer terms and makes it easier for approvals. This would be ideal for someone who is making a new start and needs quick loan approvals.
- Buy a Used Car – Owning a brand new luxury car is probably everybody’s dream ! However, in reality, a person’s financial stability plays a crucial role in deciding which car you will ultimately buy. So if you are still in the process of establishing a credit background, it will be a good idea to buy a used car vis-a-vis a new car.
Used cars are available in almost all price ranges and you can choose the one that fits your budget the best. It eases the pressure of getting rejected and also does not hurt the pocket much. You may be able to find lenders who support small loan amounts.
- Split the Payment – If you can shell out some cash towards down payment then automatically the loan amount comes down and it makes it easier for you to establish your financial stability and get approved.
While it is important to take care of your financial health from the very start and build and maintain a good credit score, but in a situation where you are wanting to purchase a vehicle sooner, the above options may help you to get your fastest car loan in Canada.